Will bankruptcy wipe out my student loan debt? - Many new college graduates are opting to apply for large student loans in the misguided belief that filing for chapter 7 bankruptcy is enough to get them out of any debt quagmire in which they find themselves if the job market remains soft. This is simply not the case.
Many new college graduates are opting to apply for large student loans in the misguided belief that filing for
chapter 7 bankruptcy is enough to get them out of any debt quagmire in which they find themselves if the job market remains soft. This is simply not the case.
Student loan debt is something that a great many people across the nation are faced with. Nearly 60 percent of students are in debt before they get their first
real job. It is estimated that most students with loans have a debt of about $25,000 by the time they graduate. On the other hand, the unemployment rate for graduating youth was at about 9 percent. This led to a majority of them accepting jobs they are vastly overqualified for, figuring they could always file for protection if they do not make the high salary they expected.
The Wrong Mindset
Another issue here is that many students major in degrees such as psychology, sociology, liberal arts, and so on where the jobs in these fields are limited and thousands of other students are graduating with the same degree. These students took the easy way out and many of them are suffering because of it. Math, engineering, and if nothing else, business, should have been programs these students should have chosen. If they thought that they could erase their mistake by walking through the Chapter 7 bankruptcy
door, they were incorrect.
The hard fact is that student loans are almost impossible to do away with in any other way than paying them off. The only reason why a student loan might be written off is if it is found that the person faces “undue hardship” in paying off the loan. And this is possible only with government student loans under certain stipulations. This option can be pursued when:
Paying the debt may push the person below the poverty line
Possess some kind of mental or disability
It can be proved that the person has made all possible efforts to clear the debt
The hardship discharge application is different from the regular ones and it has to be filed separately. The fees for this will also be separate from other associated expenses. A lawyer qualified in
Chapter 7 bankruptcy cases will be able to offer guidance and swift action in this matter.
Chapter 7 Bankruptcy
Anyone filing for Chapter 7 bankruptcy has to first go through a couple of compulsory counseling sessions. These help in evaluating the person’s financial as well as emotional well-being. Sometimes, the counseling sessions may throw up some other forms of debt pay off strategy instead of having to file for bankruptcy. Also, if the person goes ahead with the bankruptcy filing, collectors will not be able to act against the plaintiff and instead the amount of interest will be added to the loan amount remaining. After bankruptcy ends, some mutually agreeable payment plans may be agreed upon.
Talking to a lawyer with experience in filing for bankruptcy can be the best way to go about this. It may all seem easy enough to be done but is best left to a lawyer since botching this up can have a long term impact on one’s future and your job prospects. It will certainly affect your credit report which can affect obtaining loans for a small business, a car, a house, and interest rates you are levied with for years to come.
The lawyer will be able to assist in consolidating debt and drawing up an easy re-payment schedule. The interpretation of the Chapter 7 bankruptcy is a very complicated process and hence, having a lawyer by one’s side is of immense help. According to Texas law, a trustee is appointed to gather and sell all the assets of the individual. The proceeds are then given to the creditors. Furniture, electronic equipment, and other such items become the first to be sold off. This can then be followed by the home and any property that the home is built upon.
Certainly, this is not way you want to start off your life after exiting college.
Chapter 7 personal Bankruptcy is a last resort and not applicable in all cases.
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